Aldebaran Resources (TSX-V: ALDE) - One of the Very Few Large-Scale Projects Left (Transcript)

July 16 2019, 11:09 GMT+01:00

Spun out from Regulus Resources (TSX-V: REG), Aldebaran Resources has a large Gold / Copper project in Argentina. CEO John Black talked us through the company, their project and how they aren't many large-scale projects left. They currently have $12M in cash and they are exploring higher-grade zones to support their lower-grade bulk play.

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Matthew Gordon: Hi John, how are you?

John Black: Doing well, thank you.

Matthew Gordon: We spoke recently about Regulus, one of your projects in Peru. This is a spin out. So why don't you do you give us a couple of minutes on why you did that and what you think you've got here.

John Black: Okay. Our team is a group that's been together, this is actually our third company on this. Our first company was Antares Minerals where we discovered a large Porphyry, drilled out and sold it to First Quantum. We spun Regulus out of that. And fortunately, have landed on another very exciting Copper Gold project called AntaKori and Regulus. But in the meantime, we had some assets in Argentina that we'd parked while we focused on AntaKori. And with the increasingly attractive investment environment in Argentina, we realised that those projects were sitting there, there wasn't much going on. And we explored the possibility of spinning out a new company. And when we looked at that we felt we needed a stronger project in the mix in there. And a project we've been watching for quite a number of years called the Altar Project, a large Copper Gold Porphyry system. It was held by Stillwater Mining and it was not a very good match for them. And we determined that it probably wasn't a core asset and we monitored that project and looked for the opportunity to acquire it. So when that came up and we signed an agreement with Sibanye who had recently acquired Stillwater, to acquire Altar, we had that extra piece we needed. So Aldebaran spun out from Regulus Resources based on projects we have in the Salta Province, in the northwest corner of Argentina. And with a very important addition of the option to acquire up to 80% of the Altar Copper Gold project in central Argentina, in the province of San Juan.

Matthew Gordon: How do you apportion, allocate time between the different projects that you've got going at the moment?

John Black: One of the interesting challenges when we saw the opportunity to put our hands on Altar, we felt that we needed to do it. These types of projects are very hard to find.

Matthew Gordon: These projects being what? In what sense?

John Black: Well these these large Copper opportunities. Ourselves and a number of other groups, Ross Beatty's Lumina Copper group, some of the Lundin groups, have done a very good job of identifying these opportunities. Drilling them out, showing that they're economically viable and sound of major mining companies. But we've done such a good job that were starting to clear the shelves. There aren't many more of these left. Our principal shareholder Route One has been encouraging us in indicating that they will back us to put our hands on these opportunities when they're out there. So when Altar emerged and we saw we could get it at very attractive terms, we decided it was best to capture that deposit and form a second company on it. We're very conscious that it  stretches management. The same management to run two companies. So what we're doing right now is, our backers Route One and others, want to see us involved in both companies. They like the style we work. They're betting on us as a team as much as they're betting on the projects we source on this. And so what we're doing is strengthening our bench by adding additional senior management to allow us to have a stronger group and more people available and those people to be able to work between the two companies.

Matthew Gordon: Right. Okay. And talking of Route One, they are nearly 50% holders in this project. I guess that's a factor of the amount of capital that went in initially. You've spent about $5M this year on drilling. You've got somewhere in the region of $12M left in cash. Will you be needing to go to the market soon and will that allow you to actually get some more retail in there?

John Black: Yeah. The way this opportunity emerged required some significant upfront capital to acquire the project. So it's $15M in cash payments to initiate the project. So we raised $30M US, almost entirely provided by Route One, to get us started. So that resulted in them having a large substantial position in the company. Sibayne has a 19.9% interest in the company as well, as part of the way we formed the agreement. And senior management has approximately 18%. So this this one is a very tight vehicle. We will need to acquire additional funding as we move forward. We anticipate that much of that will come from the large existing shareholders. But there will also be room for new shareholders to come in on this story as it develops and emerges.

Matthew Gordon: That would be great. Well I think that would be good for the company as well in terms of driving the share price up, get a bit more floating stock out there. Okay. That's fantastic. So tell me a little bit about what the endgame is here. I guess it's going to be similar to Regulus but the potential here is a little bit larger in fact, isn't it?

John Black: Yeah really the type of companies that we've chosen to run, is when when you start a junior company you have to kind of look at where your niche fits best on this. And based on our experience and our access to large projects, what we've decided to run, both, originally with Antares, then with Regulus now, as well as with Aldebaran, is where we identify a large project that we believe that with additional drilling we can show the full size of the project. And then addition Feasibility level activities, we can de-risk the project and show the best economic pathway forward on it. So on our discovery with Antares, then the AnataKori discovery that we have going with Regulus, those are both situations where we identified projects early that had some Resource but we believed had potential to grow substantially larger, and they are. And those will play out that way. Aldebaran is a little bit different in that there's over 100,000m of drilling. There's over 2.5Bt of Resource identified right now. But the way that previous operators chose to present that was by bulking it out at a very low-grade. And so they show an extremely large deposit at low-grade. But what caught our eye on this is that we see distinct higher-grade zones within this, and that's what we're actively exploring through a 5,000m drill program this year, as well as extensive re-logging of the existing data to see if we can better define those higher-grade zones. And perhaps optimise a project around an initial higher-grade activity to get a project generated, but still not losing all that lower-grade material that surrounds it.

Matthew Gordon: I'm looking at page 13 of your PowerPoint. You put yourself in there with some pretty big names, either side of you, in terms of your Resource size... we're in the billions of pounds here. That's obviously very attractive if you've got the money to develop that. And you feel that with your current shareholders you're going to be given the runway to do that?

John Black: Well really what we tried to do, the niche that we are best set to do ourselves on this, is from that stage of discovery, through approximately to Pre-feasibility Stage (PFS). So what we do is we try to show the size of deposit and then show the best way to develop that project going forward. And then ideally if we're on the right project, and if we're at the right moment in the market, we end up having an opportunity that's presented that is very attractive to a major company. Major companies are increasingly not having much success with their own exploration teams on this. These are very hard projects to find. And they find narrow windows when they're in situations where they're able to acquire new deposits or even motivated by their shareholders. It's ironically, typically when metal prices are high and they have a lot of cash flow that they want to go out and acquire projects. So ideal scenario for us is that we drill a project like this out. We show where the higher-grade zones, a better approach on how to develop the project on that. And if we're delivering that type of a product, a large economic attractive, de-risked project, right when major companies are looking to acquire them, we have that perfect storm. We have that. So that's ideally for our shareholders, that offers an earlier monetisation event rather than waiting all the way through to development of mine. There are two periods of time when there's strong value added to it. From discovery to about Pre-Feasibility. And then again as a mine comes into production. But that gap in-between can sometimes be long and sometimes be challenging. And so we prefer to pass the baton off to a company that specialises in building the mine and let them get their benefit from that. And the First Quantum acquisition of our Antares project was a perfect example. We're good at it discovering them and drilling them out. They're very good at building them. So it was kind of a natural baton pass from us to them.

Matthew Gordon: If I look at your market cap, it's around $50M. It would seem compared to some peers that we looked at before this conversation, it's quite low. Do you think that's a factor of having too much institutional, not enough retail? Why do you think market is not paying attention to you?

John Black: I think it's just very early in the story. We've only recently launched the project. We haven't really been able to table our own drill results yet on this project, those will come in the next couple of months, as we move forward and we'll begin to reveal the strategy. So I think it's one that just a little bit quiet and off people's radar screen right now. It's not due to the strong concentration of shares, there's not a lot of float that's available out there. But I don't think it will take much interest in this company to get it back onto the map on this. So we think this is a perfect hidden gem for people to be watching for.

Matthew Gordon: It's very interesting. And again, just dealing with some questions from the chat rooms and forums. Argentina, to me I've invested in some of the Lithium projects up in the north, you've operated in South America. You're very comfortable with the mining environment and mining code in Argentina. Caused any problems?

John Black: The mining code actually works pretty well in Argentina and the potential for discovery is quite great and a number of existing deposits that are in this case available for acquisition, like we've done. The challenges in Argentina are really more due to the economy and politics of the country. And we see the country go through periods of time where inflation is out of control and it's difficult to project how you would make a large capital commitment in the country. So there are windows of very good opportunity to invest, and there are windows of time when it's not quite so good on that. It's a bit unfortunate because the potential is fantastic in Argentina. If they can get that straightened out, it would be an extremely good opportunity for the country to move forward. And mining is an underdeveloped potential for them. They depend very much on their agricultural base. But there are some very interesting mining opportunities in the country that would provide substantial benefits for the country going forward.

Matthew Gordon: Right okay. And I know this is a slightly longer-term play, as as Regulus. I'm going to ask you a difficult question, so if you could only pick one, which one would you pick.

John Black: Well it's kind of like asking me who is my favourite child. It's a difficult challenge on this. They're very similar plays. These are both long-term plays on Copper/ Gold. Both of them have a substantial Gold component to them. I would say Regulus will probably develop a little bit faster. We're drilling more aggressively there on that project right now, and we're driven a lot by the necessity for our immediate neighbours and the Cerro Corona mine down the down the road, to make transitions into larger mines in the not too distant future, to avoid closure costs. So that has a more aggressive timeline on it and is likely to move more quickly. I think there's probably deeper value opportunity in Aldebaran right now because it's a very good asset. It's not well known to the market that we've put our hands on this and that we're moving forward. We're just getting that news out. So it's a better opportunity get in earlier than Aldebaran. Regulus and the AntaKori project will probably move faster.

Matthew Gordon: Fantastic. Both children will be happy. John, thanks very much for your time on that. We will catch up in the next couple of months and see how you're progressing. Some very interesting stories from South America. So thanks again for your time. And we'll speak to you soon.

John Black: Okay great. Thank you very much.

Company page: https://www.aldebaranresources.com/

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